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What Is The Means Test? Should I File Chapter 7 Or Chapter 13 Bankruptcy

Hi I’m Shawn Yesner with Yesner Law. The Means Test is one of the most confusing things about the bankruptcy process, so I’d like to take a little bit of time to explain it in more detail.

The Means Test is what we use to determine whether a debtor can file or must file Chapter 7 or Chapter 13 Bankruptcy. What we do is we take the borrowers annual income and we compare it against the median income as determined by the IRS. Now for a household of one person the median income is $41,334, for a family of two or a household of two it’s $51,839 for three it’s $53,952 for a household of four it’s $63,196 and it goes up by $8100 for every additional person in the household. Now these numbers are effective as of November 2013 and they are adjusted annually by the US Trustee’s Office and the Department of Justice. So what we do is we compare the debtors annual income to the median income. If they’re below the median income they can file chapter 7, if the debtor is above the median income then we have to do a further analysis and compare their annual income and then deduct their expenses, both actual and IRS allowed expenses, and at the end of the formula that will produce some number, if that number is below a certain threshold the borrow or debtor can still file chapter 7 bankruptcy, but if that number is above a certain threshold, that represents the debtors disposable income and now we have to file a 5 year chapter 13 plan and possibly pay that amount to the debtors creditors over the course of the plan. I know the means test is very complicated, that’s why it’s very important to choose an attorney that understands the means test in detail and can help the debtor work through those numbers prior to filing the bankruptcy petition. If you have more questions about the means test or any other bankruptcy topic, please contact us through our website portal yesnerlaw.com, there is a contact us page on the website you can schedule a free consultation, and we can talk about this or any other issue. My name is Shawn Yesner with Yesner Law, there’s always options.

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